Economic Transition in Hungary and East Germany : Gradualism, Shock Therapy and Catch-Up Development

What factors determine the success of economic transition, development and growth?

Examining the contrast between East German shock therapy and Hungary's gradualism, this work generates a set of generalizable conditions for economic development which imply some degree of state intervention and strategy.

A stability-oriented incomes policy and a carefully managed integration strategy can enable the achievement of sustainable export surpluses, a competitive currency and macroeconomic stability, whilst providing sufficient room for economic restructuring, structural transformation and technological catch up.

The dangers of premature integration are also examined.